5 Reasons Why Owning Physical Gold and Silver Is So Important

We're briefly explaining why it is important to own physical gold and silver.

Many of us in the gold and silver community are aware of the benefits of owning physical gold and silver.

Here are five main reasons though there are many more.

1. You can protect your savings against currency devaluations.
2. They act as a hedge against inflation and hyperinflation
3. You can protect yourself should a severe banking crisis occur and you cannot access your money.
4. Owning small denominations of gold and silver will give you something to trade with, for they generally are quite liquid and can easily be turned into cash and...
5. You have no counterparty risk with gold and silver, contrary to paper assets where there is always a counterparty risk involved.

Now this latter point is extremely important. Here is a brief definition of counterparty risk: "counterparty risk is the risk to each party of a contract that the counterparty will not live up to its contractual obligations".

So, for example, you may hold your cash in the bank and should the bank fail and go bust, you may not receive your money back.

The same thing happens with company shares and bonds should the company fail or fraud occurs.

These assets may indeed become worthless. Many derivative type of investments hold considerable counterparty risks, especially as there may be many parties.

What struck us, though, as a more recent phenomenon, where counterparty risk becomes even more tangible, is the issue of cyber warfare or just plain old computer hacking.

For example, it was reported back in September 2015 that a group of Russian hackers were hijacking commercial satellites to siphon sensitive data from government military diplomatic research and educational organizations in the United States and Europe, and also to hide their command and control servers from law enforcement agencies.

If they can do this hacking into banks and stock market computers, then just imagine the carnage that can be caused here in the United States.

According to CNBC back in July and August of last year, a report appeared stating "US officials tell NBC News that Russia launched a sophisticated cyberattack against the Pentagon's joint staff and classified email system, which has been shut down and taken offline for nearly two weeks".

It's not just the Russians. One has to be cautious of, according to Business Insider in July 2015, more than 20 million people had their personal information stolen when the Office of Personnel Management OPM servers were breached by Chinese hackers.

Even more, it has been reported that Bangladesh Bank, India's central bank, is considering filing a lawsuit against the Federal Reserve Bank of New York after cyber hackers stole 81 million dollars from its account.

These are just some of the issues that we know about. It's not beyond the realm of possibility that one can have one's bank account cleared of all funds, that stock market trades may be forced stop should hackers gain access to pricing mechanisms.

Chaos could occur if cash machines are hacked and suddenly stopped working, and a whole plethora of other events which may in fact occur.

So the key message is simple: hold a manageable level of cash reserves outside the banking system and also own physical gold and silver, and store them in a safe location that can be accessed with a degree of ease.

These considerations are important, especially as more of our currency and wealth becomes digitized.

 

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